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The Long and Winding Road

March 25, 2020 by

The corona crisis will not be over soon. More than half of the ELP Members* think that corona will impact society and business for the full remainder of this year. That is one of the outcomes of a survey that ELP did amongst its Members, senior executives from a wide variety of Dutch-based companies and organizations, about the business impact of the corona virus. No less than 55.4 per cent of the respondents thinks that we will experience a big impact on society and business for the rest of the year. Nobody thinks that the crisis will be over in two weeks, only 2.7 per cent thinks the impact will be felt for four weeks, 5.4 per cent estimates six weeks and 34 per cent chooses twelve weeks. So most of them think that corona and its impact is here to stay for a considerable time. They even gave these answers before the Dutch government announced on 23 March that the country will be more or less shut down until 1 June. Two Members wrote in an additional comment that they hope that the lockdown will be restricted to three months, one person expects the borders to remain closed during the Summer holidays and two Members expect a second wave of the virus after Summer.

On 23 March 241,995 cases of corona were reported worldwide, 15,427 people had died, 11,387 patients were in a critical condition, and 100,645 people recovered or were discharged (of whom 72 per cent in China). The real number of cases is thought to be an order of magnitude greater, but many people aren’t tested.

All ELP Members see the virus affecting their business, but not only in a negative way. Optimism seems to reign, many perceive opportunities as a consequence of this crisis. As one of the respondents reports: “This has a big positive influence on the change capacity of the organization, we just make it work!”. Never waste a good crisis, they seem to think. 77 Per cent of the respondents sees new ways of working in their organizations and 64 per cent experiences the time and/or need to look for creative solutions or innovations. However, the negative business impact is no stranger to our Members’ businesses: 67 per cent perceives increased financial risks, 62 per cent expects decreasing turnover and/or profits, and 57 per cent has operational issues. Only 23 per cent reports supply chain issues.

Most ELP Members expect a severe economic downturn as a consequence of the corona crisis. About three quarters expect the world economy to decline by more than two per cent and that is more than during the financial crisis of 2007 – 2009. 39.2 Per cent thinks that the world economy will shrink between two and four per cent, 35.1 per cent even expects a recession of more than four per cent. Only 20.3 per cent foresees a downturn of less than two per cent. However, it is possible that of those 35 per cent that expects a recession of more than four per cent, some expect five per cent while others fear ten per cent or even more; we didn’t ask respondents to specify their expectations. Nevertheless, some did in an additional comment: one respondent considers a decline of more than ten per cent likely and another writes that we might be heading towards a depression, which is much more severe than a recession.

Many experts foresee an economic downturn that will be worse than the financial crisis of 2007 – 2009. That crisis was deepest in the US and parts of Europe, with US GDP contracting by 4.3 per cent in those years, while countries such as China, India, Australia and Poland escaped a recession. As The Economist wrote in a leader in its March 21st issue: “Faced with the most brutal recession in living memory, governments are setting out rescue packages on a scale that exceeds even the financial crisis of 2007-09”. If Chinese statistics are a guide, the way down can be long this time: industrial output fell by 13.5 per cent in January and February, retail sales were 20.5 per cent lower and fixed-asset management declined by 24 per cent.

Asked about their main concerns as leaders, 78 per cent of the respondents mentioned continuity of the business, 73 per cent is concerned about the health of their employees and 54 per cent want to manage the financial risks they are experiencing. ELP will check its Members’ pulse again in June by asking them about their economic outlook to see how their expectations are developing. To conclude on an optimistic note, as one of the respondents writes: “This is a massive opportunity to do good”.

Note: this survey was sent to the 356 Members of ELP. There were 74 respondents, a score of 20.8 per cent.